Brent had just received the assignment he had always dreamed of. It was a chance to chase the glory of creating an entirely new business — without leaving the company where he had worked for over a decade. His company’s assets were immense. He would have help in marketing and engineering that most entrepreneurs could only dream of. Not only that, he had sufficient support from the CEO that he was able to hand pick his staff from among the company’s top performers.

By Vijay Govindarajan3 minute Read

Brent had just received the assignment he had always dreamed of. It was a chance to chase the glory of creating an entirely new business — without leaving the company where he had worked for over a decade. His company’s assets were immense. He would have help in marketing and engineering that most entrepreneurs could only dream of. Not only that, he had sufficient support from the CEO that he was able to hand pick his staff from among the company’s top performers.

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The opportunity was energizing because the new business was unlike anything his company had ever attempted before. There was an entirely new customer set, and a completely different value proposition. There was great potential, and there were great uncertainties.

Brent realized that it would be a challenge to get his staff to truly think and act in new ways. So he took some bold steps. He arranged to house his team in new office space, across town from headquarters. He talked about developing a new culture — one that was more open and opportunistic, flexible and free.

He even made some very insightful observations about how the new business would have to succeed in a much different way. He wrote these insights into a charter for the new business. He carefully trained everyone involved on the significant points in the charter — until he was convinced that the differences were well understood.

And all of Brent’s careful forethought accomplished nearly nothing.

What Brent was trying to do, in essence, was to erase the company’s memory. He vastly underestimated the difficulty of doing so.

Forgetting the past requires much more than simply creating conversational awareness about how the future is different. Conversations are fleeting. Several sources of organizational memory, on the other hand, have true staying power.

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Instincts Rooted in Experience: New high-growth businesses are extreme pressure cookers. Not only that, they present managers with one ambiguous choice after another. It is at these times that we are all likely — for better or worse — to act on instinct. Actions become instincts when they consistently lead to success. So what happens when the business model changes, and the success formula changes with it?

Relationships: Once working relationships are established, patterns of interaction harden. You tend to go to the same people with the same questions — because doing so is efficient. But this reinforces an organization’s capabilities rather than helps it build new ones.

Norms for Organizational Structure and Status: Do the mechanical engineers run your company? The marketers? The finance folks? Who typically talks to whom? When? Under what preconceived notions? These norms have led to success for the existing business, but will they do so for the new one?

Information Systems: Your company has invested heavily in automating information flows. In doing so, it has hard wired the types of information you see and when. Operating reports are standardized. All that seems very efficient, but the numbers you look at shape your perceptions of what is happening and why. The new company is likely better off looking at different information.

Those are just the highlights. Compensation packages, annual evaluation forms, even the stories that a company tells about its history are all hidden reinforcers of organizational memory.

For Brent to have succeeded in creating a truly new organization, he would have had to consider some much more significant changes. Most critically, he would have had to make a concerted effort to recruit from outside the existing organization. Further, he would have had to establish a distinct reporting structure, to create different planning systems and business performance reports, and to develop entirely new policies for hiring, promoting, and evaluating individual performance.

Oh, but the temptations to avoid such changes are strong. First, giving a new division the ability to break all of the rules, especially close-to-the-heart ones like who gets highly compensated and promoted and why, is bound to generate resistance and even resentment. Further, what could be more convenient than transferring what already exists to the new unit? Why waste time tinkering with organizational policies when there are new products to design, new customers to find, and new competitors to defeat?

Nevertheless, when it comes to creating the future, a strong case of amnesia is crucial. And erasing organizational memory is no delicate task. It is most easily accomplished just as a new high-growth-potential business is launched.